Chamber-Championed Garnishment Reforms Effective October 1

October 5, 2015

October 1 marked the effective date of significant reforms to Michigan’s wage garnishment system.  The legislation was championed by the Michigan Chamber after we received numerous complaints from members about various administrative issues, costs and legal snarls associated with administering garnishments.    

Under the old system, employers received a one-time $6 payment and in return were expected to process employee garnishments, respond to court orders, calculate and withhold from employee’s paychecks for 182-days, and make payments to creditors. One small administrative mistake could expose an employer to the risk of being held liable for the entire bad debt of an employee, former employee or even someone they’ve never met – plus court costs and attorney fees.

House Bills 4119 and 4120, now Public Acts 14 and 15 of 2015, addressed several of these issues. The bills: 

  • Put an end to the practice of allowing creditors to pursue a default judgment against the full bad debt of an employee by requiring several notices to the employer of its failure to garnish and now allow employers ample opportunities to cure their errors and begin garnishing. 
  • Specify that a Writ of Garnishment would continue until the debt is paid off (current practice requires renewal every 182 days, causing a constant administrative churn).
  • Increase the fee creditors pay to administer garnishments from $6 every 182 days to a flat $35 fee. 
  • Require creditors to provide to the debtor and debtor’s employer a statement every six months explaining the balance remaining on the judgment, including interest and costs, and release a garnishment within 21 days after the debt has been paid in full. 
  • Make the service of garnishment consistent with the service of other legal documents.
  • Define “garnishment” to help the courts and others better identify what types of court orders qualify as a garnishment, thereby requiring third parties and/or employers to withhold income and remit payment.

All of the new changes apply to writs of garnishment issued after September 30, 2015 and reflect real solutions to real problems our members were experiencing with the garnishment system. We appreciate the Legislature’s efforts on this important reform.

For more information, contact Wendy Block at (517) 371-7678 or wblock@michamber.com.